When thinking about how to ship a medium-sized KickStarter project (say, 500-10k backers), most people turn to a fulfillment service.
While in specific cases there are good reasons to do so (such as helping international backers avoid duty and processing fees), when it comes to domestic backers (as well as backers in certain countries with enlightened customs regimes) you can often save a ton of money -- and even effort -- by doing it yourself.
The thing to keep in mind about most fulfillment companies -- think Amazon for example -- is that they are optimized to handle piecework. 99% of their business is "put A, B and C in a box and ship it out; then put D, E and F in a different-sized box and ship it out". This is a complicated and labor-intensive job and you pay for it -- plus you have to interface to their systems.
But most Kickstarter shipping isn't piecework -- it's an assembly line: "put A in a box, ship it out; put A in a box, ship it out; put A in a box, ship it out". And as Henry Ford so famously proved, you can save a ton of money by setting up a production line.
When I shipped my Bubblegum Crisis kickstarter, I mailed out 3000 packages in 6 days with the help of 2 people. Even though I had 3 main product variants and all sorts of sub-variants (like "double copies"), by breaking it down into batches that were all identical, the job became very simple and the number of backers who got the wrong thing could be counted on one hand.
What's more, I did it in my living room. By doing it myself instead of using fulfillment, I probably saved $2-$3 per package -- that's $5K-$10K overall. I also had complete control over how everything was packed, so my damaged-in-shipping rate was very low.
Automation was the key to all of this: I wrote an app to manage all of my backers and generate cost-efficient shipping batches, and I interfaced it all with Stamps.com so I could get commercial mailing rates and nice labels with barcodes.
A lot of work? Sure.
Worth it? Definitely.
Want to play with the app? Go here.
You can use it for free -- and then send me what you think it's worth.
PS: if you do decide that fulfillment is the best route for you (either completely, or for particular circumstances), then the Stonemaier games blog articles about the process are must reads (as are the rest of the articles!)